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Entry Regulations and Product Variety in Retail

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We study how changes in competition from entry regulations impact stores’ incentives to adjust product variety. Using Swedish data, we estimate a dynamic model of endogenous product offerings where stores utilize multiproduct technology to generate sales. The median long-run benefit of adding one more product category is 20 percent higher in restrictive than in liberal markets. Counterfactuals show that more liberal regulation spurs repositioning and increases variety, especially in rural markets, driven by a new mechanism of productivity gains and cost reductions. Strong liberalization enhances product entry in markets with restrictive regulation but less in rural markets with limited demand.

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  • Orth, Matilda & Maican, Florin, 2021. "Entry Regulations and Product Variety in Retail," Working Paper Series 1386, Research Institute of Industrial Economics, revised 13 Sep 2024.
    • Handle: RePEc:hhs:iuiwop:1386
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    More about this item

    Keywords

    Retail; Entry regulations; Competition dynamics; Variety; Productivity;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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